Correlation Between IShares International and Dimensional International
Can any of the company-specific risk be diversified away by investing in both IShares International and Dimensional International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares International and Dimensional International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares International Select and Dimensional International Value, you can compare the effects of market volatilities on IShares International and Dimensional International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares International with a short position of Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and Dimensional International.
Diversification Opportunities for IShares International and Dimensional International
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Dimensional is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Select and Dimensional International Valu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and IShares International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares International Select are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of IShares International i.e., IShares International and Dimensional International go up and down completely randomly.
Pair Corralation between IShares International and Dimensional International
Considering the 90-day investment horizon IShares International is expected to generate 1.46 times less return on investment than Dimensional International. But when comparing it to its historical volatility, iShares International Select is 1.01 times less risky than Dimensional International. It trades about 0.04 of its potential returns per unit of risk. Dimensional International Value is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,828 in Dimensional International Value on August 30, 2024 and sell it today you would earn a total of 798.00 from holding Dimensional International Value or generate 28.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares International Select vs. Dimensional International Valu
Performance |
| Timeline |
| iShares International |
| Dimensional International |
IShares International and Dimensional International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares International and Dimensional International
The main advantage of trading using opposite IShares International and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International position performs unexpectedly, Dimensional International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dimensional International will offset losses from the drop in Dimensional International's long position.The idea behind iShares International Select and Dimensional International Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |